Cabinet approves steep 200 per quintal hike in MSP for paddy

The government on Wednesday hiked the minimum support price (MSP) for paddy by a steep ₹200 a quintal as it looked to fulfil its poll promise to give farmers 50 per cent more rate than their cost of production.

The decision, taken by the Union Cabinet headed by Prime Minister Narendra Modi, comes less than a year before the next general election.

While the BJP had promised in 2014 to give farmers a price of 1.5 times of cost, an announcement to give effect to the promise was made in the government’s fifth and final annual budget presented on February 1, 2018.

CCEA approval

The Cabinet Committee on Economic Affairs (CCEA), at its meeting on Wednesday, approved the MSP for 14 kharif (summer sown) crops.

According to sources, the MSP for paddy (common grade) has been increased by ₹200 to ₹1,750 a quintal, while that of Grade A variety by ₹160 a quintal to ₹1,750.

The MSP for paddy (common) was ₹1,550 a quintal and ₹1,590 a quintal for paddy (Grade A) variety.

The MSP for cotton (medium staple) has been increased to ₹5,150 from ₹4,020 and that of cotton (long staple) to ₹5,450 from 4,320 a quintal.

In pulses, tur MSP has been raised to ₹5,675 a quintal from ₹5,450, and that of moong to ₹6,975 a quintal from ₹5,575. Urad MSP has been hiked to ₹5,600 from ₹5,400 a quintal.

The Hike in paddy MSP will increase the food subsidy bill by over ₹11,000 crore based on the procurement figure of the 2016-17 marketing year (October-September).

The Food Corporation of India (FCI) buys wheat and rice from farmers at the MSP and supplies the grains under the food security law.

Paddy is the main kharif (summer sown) crop, the sowing of which had begun with the onset of the Southwest monsoon.

Earlier, sources had said that the MSP rate proposed by the AgricultureMinistry is higher than the government’s farm advisory body, CACP, considering growing farm distress because of fall in prices of most crops, owing to bumper production.

Record grains production

India is estimated to have harvested a record grains production at 279.51 million tonnes in the 2017-18 crop year (July-June) on all-time high output of rice, wheat, coarse cereals and pulses.

The announcement of higher MSP, coupled with forecast of normal monsoon this year, could further boost foodgrains output. However, the higher support price could also fuel food inflation.